Question
In: Economics
Freda consumes two goods, spinach (s) and chocolate turtles (t). Her utility from the consumption of...
Freda consumes two goods, spinach (s) and chocolate turtles (t). Her utility from the consumption of these two goods is given by u(s,t)=10st. The price of spinach is $1, the price of turtles is $1, and Freda has $1200.00 to spend on these two goods.
In the questions below, give all your answers to two decimal places.
t Part 1 (2 points)See Hint Given the initial prices and income, Freda's optimal consumption bundle is composed of 600 units of s and 600 units of t .
Part 2 (2 points)See Hint Now suppose a tax of $1.00 is imposed on chocolate turtles. For simplicity, assume that the entire $1.00 tax is passed on to consumers so that the new price of chocolate turtles is $2.00. This means that Freda's optimal bundle, after the tax is imposed, is units of s and units of t .
Part 3 (3 points)See Hint Now suppose that Freda receives a rebate equal to the amount of tax that she pays. This rebate will increase her income from $1200.00 to $ . If Freda readjusts her consumption bundle, she will now demand units of s and units of t .
Part 4 (2 points)See Hint Let's explore the utility implications of this tax rebate. Given her original optimal bundle, Freda's initial utility was . After the tax is imposed, but then the amount she paid in tax is rebated back to her, Freda's utility is
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Sally consumes two goods, pizza (P) and hamburgers (H). Her utility function is given by the...
Sally consumes two goods, pizza (P) and hamburgers (H). Her
utility function is given by the expression U = 3PH2.
The current markiet price of pizza is $10, while the market price
of hamburgers is $5. Sally's current income is $500.
a. Roughly sketch a set of two indifference curves for Sally.
b. Write an expression for Sally's budget constraint. Graph the
budget constraint and determine its slope.
c. Determine the combination of pizza and hamburgers that
maximizes Sally's utility,...
A consumes two goods, x and y. A ’s utility function is given by u(x, y)...
A consumes two goods, x and y. A ’s utility function is given
by u(x, y) = x 1/2y 1/2
The price of x is p and the price of y is 1. A has an income
of M.
(a) Derive A ’s demand functions for x and y.
(b) Suppose M = 72 and p falls from 9 to 4. Calculate the
income and substitution effects of the price change.
(c) Calculate the compensating variation of the price
change....
Jessica derives utility from her consumption of two goods, video game plays on an X-Box (call...
Jessica derives utility from her consumption of two goods, video
game plays on an X-Box (call it good X) and high energy yogurt
(call it good Y). Her utility function is U(X,Y) = XY. The price
per play of games is $2.00 and the price of yogurt is $10 per
container and Jessica's income is $50 per week. She is presently
consuming a bundle of game plays and yogurt such that her marginal
rate of substitution is 1 (or -1,...
Esther consumes goods X and Y, and her utility function is U(X,Y)=XY+Y For this utility function,...
Esther consumes goods X and Y, and her utility
function is
U(X,Y)=XY+Y
For this utility function,
MUX=Y
MUY=X+1
a. What is Esther's MRSXY?
Y/(X + 1)
X/Y
(X + 1)/Y
X/(Y + 1)
b. Suppose her daily income is $20, the price of X is $4
per unit, and the price of Y is $1 per unit. What is her
best choice?
Instructions: Enter
your answers as whole numbers.
X =
Y =
What is Esther's utility when her...
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
A utility-maximizing consumer who consumes quantity x and y of two goods has a quadratic utility...
A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
Charlie likes two goods, pears and kiwis, and consumes no other goods. We write his consumption...
Charlie likes two goods, pears and kiwis, and consumes no other
goods. We write his consumption bundle as (pears,kiwis), so that
pears are the x variable and kiwis the y variable. Last month,
Charlieconsumed 20 pears and 5 kiwis. The indifference curve
through this bundle is described by y=100/x.Furthermore, you are
told that the set of bundles for which he is indifferent between
them and a newbundle at(10,15)is the set of bundles with y=150/x.
(a) Plot the two indifference curves....
An Individual consumes commodity bundles including two goods: P and Q. The satisfaction/value/utility obtained for the...
An Individual consumes commodity bundles including two goods: P
and Q. The satisfaction/value/utility obtained for the individual
is provided by the following equation – 3*(units of P)^2 + 2*(units
of Q). Now answer the following questions
a. Compute the utility got the following bundles – (12, 5),
(2,7) and (8,5)
b. Considering a utility level of 75 units; identify one
consumption bundle that provided that level of utility
c. Now draw an indifference curve for the individual with an
utility...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain how biology, culture, and their interaction shape sex differences.
- Write a program that computes the tax and tip on a restaurant bill for a patron...
- clear all close all % %*******Parameter Settings******** %********************************* Fs=8192; %Sampling frequency (MATLAB's default) Ts=1/Fs; %Sampling time...
- Name a business that you believe has experienced declining costs attributable to computerization. Were variable costs...
- With C++, 1. Assume we use two linked lists that represent Set A and Set B...
- A beam of light shines on an equilateral glass prism at an angle of 45∘ to...
- This is an intro to python question. #Write a function called search_for_string() that takes two #parameters,...
ADVERTISEMENT